Everyone that knows me knows that I have a special place in my heart for Missouri politics. For us political junkies, there has been lots of excitement. At the end of June, Missouri Governor Jay Nixon called a special session to do two things. 1) Pass tax incentives to keep the Ford plant in Claycomo, Missouri and 2) reform Missouri’s state pension plan for future state employees. A 20+ hour filibuster against the $150 million tax credit proposal ended this morning in the Missouri Senate.

I’m not a fan of corporate tax incentives. Ford has (not publicly, but to politicians) threatened to leave Missouri if they do not receive tax incentives to keep the plan open. How much will this cost Missourians? $150,000,000 over 10 years, or $15,000,000 per year. In other words, Missouri taxpayers will be subsidizing the salaries of these workers, if they stay) to the tune of $4,054 per employee, per year. Multiply that times the 10 year period and Missouri taxpayers are nearly paying the salaries of these 3,700 employees, paying the equivalent of $40,540 per employee.

I often defend and smack around President Obama’s health care reform bill during the same breath. Was there the potential for bipartisan reform? Yes. Did Obama muscle it through, silencing the minority? Yes. President Obama should see how the Missouri Senate Republicans handled the tough issues of session, in which they which could have used the “nuclear option” on several issues. Instead, they compromised with the Democrats.

There are great things in the health insurance bill such as the elimination of lifetime caps on benefits, insurance eligibility for dependents, preexisting conditions. All of these things should be met with open arms. While the health insurance industry hates these provisions, they protect you and I, and are appropriate regulations.

Conceptually, I have no problem with requiring individuals to maintain some sort of health insurance coverage. Do I think it’s the federal government’s job to require this? No. This bill should have required states to pass a law requiring people to obtain some sort of health insurance option and tie Medicaid money to it. This carrot/stick mentality has been done with regards to auto insurance and seat belt requirements, the money being tied to transportation roads.

For my first post, I thought I would tackle something that divides Republicans. Gaining momentum in the Missouri legislature has been to exchange the Missouri income tax system and replace it with a sales tax, commonly known as the “FairTax” system. The Missouri House has shown that they are able to pass it, but the Missouri Senate is where the plan has stalled.

In Missouri, the sales tax plan would “not exceed 7%.” Switching to a sales tax-based plan is a bad idea. The champions of the plan argue that everyone will get a probate, or check that would cover the increased cost in taxes on necessities. No incomes taxes and receiving a check by the state each month sounds good right? Re-evaluate this with me with 3 major considerations.

1. The plan does exempt a few services such as tuition paid for education and donations to charities to be exempt. The following is a small list of what would be charged sales taxes that do not currently charge sales tax:

Rent

Healthcare/Dental Care

Prescription Drugs

Utilities (including cable/internet)

Child care

Purchasing cars/homes, etc.

While a 7% sales tax may not be much on a $10 a month prescription drug, it is significant on that home that did cost $100,000, has increased to $107,000. Rent for us college age students would rise from $600 per month to $642 a month.

2. While the plan said the statewide sales tax wouldn’t be more than 7%, would this bring in enough revenue to Missouri? Because no state has made a transition fully to a “fair tax” system, to reach current revenue estimates, this tax rate could need to be as high as 12%.

Because the plan is capped at 7%, if Missouri makes this transition and were to bring in say $7 billion instead of the anticipated $8 billion, the state would be forced to make cuts to balance the budget. The Missouri legislature just cut over $500 million in General Revenue from its budget, and that was incredibly difficult to do. We will see a tougher budget year in 2012. Do we want to see a change in our tax system to create instability when budget times are already incredibly tight?

Let’s take myself as an example. Under the current tax system, while it is complicated, I hired an accountant to do my taxes. As both full time students, my wife and I had no tax liability (state or federal) and had a nice tax return. This wouldn’t be possible under the “fair tax” plan. The only calculator that I found online to attempt to compare the two systems was on the Fair Tax’s website. This calculator is of no help because it compares a federal “FairTax” plan.

3. An argument for the “FairTax” is that it would lower consumer prices, and increase consumer spending. While saying that if we take away taxes from a business, that they will immediately drop the cost of the product by the amount they are taxed is speculating, let’s go with it.

Because this plan is just for Missouri, would a company decrease their prices in Missouri and not the rest of the country? I don’t think so.
The “FairTax” model plans on consumer spending. The average family is over $8,000 in debt in credit cards alone by purchasing consumable items. Assuming a family does save money under a new system, do they help keep the economy afloat by purchasing a higher taxed item or do they pay down their credit card debt or pay bills with? Or, do they go to Illinois or Arkansas to purchase their $20,000 car instead of Missouri?

I would encourage everyone to read about the “FairTax” before making their opinion. Many research groups (proponents would argue these groups are liberal organizations) have said that moving to a consumption tax in Missouri would increase taxes for 95% of Missourians. During public testimony, dozens of groups testified in opposition to the proposal. Fortunately for Missourians, this proposal will not appear on the 2010 ballot, but this proposal isn’t completely dead yet.